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Blue Cross Blue Shield Administrative Cost Trends Decrease in 2008, Product Mix Shifts

July 21, 2009

Philadelphia. July 21, 2009.  Per member administrative costs grew by 2.7% in 2008, compared with 4.3% in 2007. Adjusting for the shift in product mix towards ASO and FEP, administrative expense growth increased to 4.0% in 2008 from 2.5% in 2007. Administrative expenses were 9.9% of premium equivalents in 2008 compared with 10.4% in 2007.  Plans reported total administrative expenses of $25.95 per member per month.  All cited values exclude investment and non-operating income and expense, income taxes and miscellaneous business taxes.

These results are excerpted from the Blue Cross Blue Shield (Blue) edition of the Sherlock Expense Evaluation Report (SEER), a benchmarking study comprising the results of 22 plans serving 31.3 million people surveyed by Sherlock Company. Over 90% of last year’s Blue participants did so again in 2009 and 77% have at participated for at least six years. For public policy and competitive reasons, administrative cost management is a high priority for health plans.

Sherlock benchmarks include thousands of operational and financial performance metrics. Besides Blue plans, other universes include Independent / Provider-Sponsored plans, Medicare plans, Medicaid plans and Larger plans. Collectively the 50 plans serve more than 39 million insured Americans.

The growth in administrative costs ranged from a high of 11.3% for Medical and Provider Management to a decline of 0.1% for Corporate Services. Douglas B. Sherlock, CFA, Sherlock Company’s president, noted, “More than 40% of the cost increase was due to medical management and information systems.”

Additional information will be published on July 22 in Plan Management Navigator, available upon request or at our website, The complete analysis is available in SEER. Please call for additional information.

We will host a web conference on Thursday, July 23 from 2:00 PM to 3:00 PM East Coast Time to discuss the summary results. Doug Sherlock will offer a brief presentation, followed by questions and answers. To participate in the web conference, please register at:

Once registered, dial-in information and a link to connect to the web will be provided in a confirmation email.


Sherlock Company (, based in Gwynedd, Pennsylvania, provides informed solutions for health plan financial management. Since its founding in 1987, Sherlock Company has been known for its impartiality and technical competence in service to its clients.

Douglas B. Sherlock, CFA
Sherlock Company

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